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Spread Trading | Stock Trading - Google Stocks, Apple Stocks

We offer NetTradeX trading terminal capabilities for creating synthetic instruments through PQM method. Let us examine spread trading between two stocks. At first, it is necessary to analyze the financial status of the companies and their prospects.

Let us make an express evaluation based on Apple and Google.

AppleGoogleNasdaq 100
Growth of stocks for 20135,23%52,36%31,10%
Capitalization, bln $ 493.97 367.704250
Revenue for a year, bln $ 170,9150,175
Net income, bln $37,03710,788
Source: hereinafter Reuters/Eikon

As it is seen from the chart data, Apple has got almost three times more revenue and net income for 2013, than Google. However, its shares almost didn't grow and capitalization is higher just for one third, than that of Google. For reference we have presented in the chart the numbers of Nasdaq 100 index.

Investors suppose that financials of Apple will grow with slow pace because of increasing competition with device producers on Android platform. Accordingly, they do not hurry yet to buy the company shares.

In the period from January 23 to 30 2014 Apple will present the report for the first quarter of 2014. It is a very significant corporate event, which is able to affect the company quotations.

Q3 Jun-12Q4 Sep-12Q1 Dec-12Q2 Mar-13Q3 Jun-13Q4 Sep-132013Q1 Dec-13Q2 Mar-14
Revenue, bln $ 35,02335,96654,51243,60335,32337,472170,9157,46345,508
Growth % vs. Prior Yr.22.6%27.2%17.7%11.3%0.9%4.2%5.4%4.4%
Growth % vs. Prior Yr.19.6%23.0%-0.4%-18.0%-19.8%-4.7%2.0%6.5%
Net profitability%25.2%22.9%24.0%21.9%19.5%20.0%22.1%21.0%

The Apple chart contains the main indicators which should be noted. It is supposed, that if the reality coincides with the forecast or exceeds it, the quotations will grow. It should be mentioned that the forecasts are periodically reviewed. For Apple the end of financial year is on September 30. Accordingly, it publishes report not for the fourth but for the first quarter of the new year.

Let us now examine the forecast of Google annual report and make a comparison. Investors expect financials of the company to grow faster than by sector on average.

Q2 Jun-12Q3 Sep-12Q4 Dec-12Q1 Mar-13Q2 Jun-13Q3 Sep-13Q4 Dec-132013Q1 Mar-14
Revenue, bln $ 9,61411,33112,15913,96914,10514,89316,6859,64716,24
Growth % vs. Prior Yr.39,00%50,90%49,50%71,70%46,70%31,40%37,20%16,30%
Growth % vs. Prior Yr.15,80%-7,10%11,50%14,90%-5,50%18,90%15,40%6,40%
Net income Margin%34,80%26,60%29,20%27,90%22,90%24,50%24,50%25,80%

According to forecasts, Google earning per share (EPS) should grow up to 15,4% in the fourth quarter of 2013, as compared to the same quarter of the previous year. The Apple forecast is much more modest - +2%. In Google the growth of the quarter revenue is expected by 37,2%, as compared to the previous year, and in Apple- by 5,4%. In our view, it is a significant difference.

As in case of Apple, any review of Stock revenue and income in the direction of increase will contribute to the growth of quotations and, on the contrary, if forecasts worsen, quotations may decrease as well. The release of the Google report for the fourth quarter of 2013 is expected on January 20, 2014.

Certainly, any further development is possible in Stock market. However, we have disengaged ourselves from all kinds of news without any exception and have exclusively analyzed the report. Besides, we have used forecasts of the annual report for December 23.

  • As a result of express analysis, we can suppose that Apple stocks will rise in price more slowly and fall in price more quickly, as compared to Google stocks.
  • At least, before the release of the annual report or maybe later, if it does not give any surprise.

Now, that there is an opinion regarding the dynamics of the quotations of these stocks, let us create a personal composite instrument (PCI) - &Google/Apple in proportions of 50 to 50. You can read more about how to do it in section ''New Technologies'' - ''Quick guide'' – ''How to create PCI by PQM Method'' in the website.

Let us now examine graphs of stocks and created composite instrument.

The date of express analysis is noted with an arrow. As can be seen from the graph, Google stocks were in neutral trend on the time graph, while it is better to use strongly pronounced trend.

On time graph of Apple stock there is a descending trend. However, it was difficult to forecast it at the end of December. The company has negotiated a contract regarding the supply of mobiles to China. At the opening ceremony on December 23 there was a large gap up. As a result, it was closed and the quotations set a new local minimum.

In our view, the analysis of the combined instrument &Google/Apple provides more opportunities for successful trading.

The combined instrument was in a growing trend with strongly pronounced support level. First, it is a trend line and secondly, the upper limit of the gap up. Besides, the opportunity of ascending trend continuation was confirmed by the fundamental express analysis of the both companies.

In future, we will keep on familiarizing you with unique PQM Method. Now we want to mention its important feature. Theoretically, it is possible to open two or more multidirectional positions. However, only on NetTradeX trading terminal you will be able to analyze the dynamics of the created composite instrument by graphical analysis method.

Questions and suggestions :analytics@ifcmarkets.com